Jupiter ‘happy’ at bumper £5 million FSCS refund

Jupiter Fund Management is 'happy' with the £5 million rebate it has received from the Financial Services Compensation Scheme (FSCS).

Jupiter had originally paid £5.2 million into the scheme in 2010 to compensate investors who had lost out from the failure of a number of financial institutions, including Keydata.

The FSCS subsequently opted to refund fund managers ahead of advisers on any recoveries it made from Keydata.

‘This is a better outcome than we hoped for,’ Jupiter chief financial officer Philip Johnson told Wealth Manager. ‘We have been working with the FSCS hard on what rate we should pay and we are very happy with this outcome.’

Dividend hike

The news was revealed in Jupiter’s full year numbers in which it increased its dividend by 13% to 8.8p.

The FSCS rebate, along with a reduction in financial expenses, helped profitability jump from £70.3 million to £73.6 million.

Meanwhile, assets under management rose from £22.8 billion to £26.3 billion and inflows edged up from £0.7 million to £ 1 billion.

However, total net revenue fell from £248.5 million to £244.5 million due to declines in performance fees and initial charges. The UK accounted for the bulk of this revenue at £225 million, while continental Europe dipped from £18.3 million to £14.7 million.

In the run up the results, brokers had expressed concern on the impact of the retail distribution review (RDR) on the firm given its high exposure to the UK.

Bank of America Merrill Lynch expressed this concern in a note published at the end of January. ‘Given the uncertainty around RDR we are forecasting a slowdown in the group’s inflows,’ the note said.

‘We believe Jupiter’s best in class reputation means that it will eventually thrive in a RDR compliant world. However, we are more cautious in the short run given what will most likely be a choppy transition period of the IFA community.’

Jupiter chief executive Edward Bonham Carter (pictured) said he is not too worried about this, while pointing out the group continues to look to diversify its business.

‘We have been diversifying our business and we also believe in focus, so we are not too concerned about our exposure to the UK market, Bonham Carter told Wealth Manager. 'We believe it’s better to focus on excellence rather than be overly diversified.’

Johnson added: ‘The UK market has always had a good equity and long term savings culture so it’s a good market to be highly exposed to.'

Market reaction

Commenting on the results Bonham Carter told the market: ‘Our strong investment performance, brand and distribution capabilities have helped Jupiter steer a steady course through another challenging year for financial markets.

'This, combined with our increasingly robust balance sheet and confidence in our growth prospects, has led the board to recommend increasing our total dividend by 13% to 8.8p.’

Bonham Carter is cautiously optimistic on the future: 'It is possible the current rally in financial markets will be sustained, assuming the ECB continues to support weaker economies and the US recovery is not derailed.

'However, in reality, not much has changed from a year ago and markets are still facing several long term challenges. While savers across Europe remain squeezed in the short term due to low wage growth and increases in the cost of living, the structural growth drivers for the savings market remain intact.'

The market welcomed the figures, with shares rising 2.34%, or 7.7p to 337.2p by 10.45am to sit just shy of their 12-month high of 337.2p.

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